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What Records Can You Really Throw Away?

A rundown of what to toss and what to treasure -- and for how long.

Stashes of old, paid bills, expired life insurance policies, receipts for broken gadgets, and canceled checks for haircuts you got in college -- sound like your filing system?

I confess: It's a pretty accurate description of mine before I spent a recent Saturday going through the "stuff to sort through" box (sadly, larger than my "stuff I've already sorted through" box). It was long overdue: In addition to being a fire hazard, the blizzard of paper buried the important papers I'll need to file my taxes, not to mention a few flattering photos of me on a particularly good hair day.

"Grab the shovel, honey! It's time to find the filing cabinet!"Crank the tunes, grab a few trash bags and a paper shredder, and have plenty of caffeine handy: It's time to clear the clutter. Here's a basic rundown of what to toss and what to treasure -- and for how long. It's not an all-inclusive list, but it's a good place to start:

Monthly bills/receipts (unless deductible): After you check them for accuracy and settle up, go ahead and toss old bills, as long as you don't need them for tax filing purposes.

Pay stubs: Once you've reconciled your paycheck -- or checked it against annual statements -- send all but the annual pay rundown to the circular file. One exception: If you're applying for a mortgage, you might need two or three stubs to prove you haven't been fired.

Warranties, manuals, repair records, receipts: Electronics all tend to come with a file cabinet's worth of paper. When you open the box, weed through everything and find what you really need, such as the warranty and "quick-start" guide. Directions in French are really only useful to the French. Once you sell or break your little treasure, send the sheath of manuals along with it.

Keep temporarily (until updated, sold, or disposed of)

Current health benefit information and insurance policies (cars, home, other valuables): Until claims are settled, keep copies of the actual policies so you know what's covered -- and how to file a claim in the first place.

Loan agreements: Keep the most current terms and conditions for your credit card accounts, and toss the old. Your monthly statements can be tossed as soon as you reconcile. Same with your current mortgage and car loan paperwork. If you sell or pay off the car or house, keep confirmation of this activity for at least a year or so, particularly until you receive a clear title to a vehicle or piece of real estate.

Canceled checks/receipts for big-dollar purchases and home improvements: Don't go hog wild holding onto every outrageous dry-cleaning bill, though. Think jewelry, furniture, art, home improvements, and plasma TVs. Should flood, hungry termites, or fire sweep through, these will help you prove to the insurance company how cool your stuff was.

Keep long-term (until seven years after the asset is sold)

Investment records: You need to keep documents that prove cost basis -- annual statements, split/buyout/merger notices, and the like. For taxable accounts, all you really need to keep are the trade confirmation slips and notices of stock splits, mergers, and buyouts. The quarterly statement is a nice backup if you lose one of these items. When you sell a stock, simply match the buy slip with the sell slip and keep them with your tax records for the year you sold the stock. Keep your year-end brokerage statements, which have dividend and interest information; you'll need them to do your taxes. Keep them with that year's tax return, and keep the records for seven years.

IRA contribution/withdrawal records (after you retire or close an account): You aren't required to keep records for IRA accounts, with one exception: You do need to track any contributions (not earnings, just money you deposited to the account) that were not deducted from your taxes. That means you need to track all contributions to a Roth IRA and any contributions to a traditional IRA that were made with after-tax money. These contributions aren't taxed when you withdraw them (and Roth contributions can even be withdrawn before retirement), but you have to be able to show that you already paid taxes on that money.

Tax records: You are required by law to keep tax records for three years, and most experts recommend seven. The easiest way to comply is to put all of your tax forms, W-2s, stock trade confirmations, and receipts for all deductions into a 9-by-12 envelope, with the tax year written in permanent marker on the outside. Review annually, and toss the stuff that's more than seven years old.

Real estate records: Although the laws have been liberalized on capital gains for house sales, you may still need to track the cost basis for your home or series of homes. Keep real estate transactions (buys and sells) for each house and receipts for any large capital improvements you make, such as a deck, an addition, or major landscaping. Keep these records for all houses, since your cost basis goes back to your first house purchase. For your current house, keep pre-purchase inspection reports in case the inspector missed anything.

Form W-2: Keep these until you start collecting Social Security. You want to make sure you're getting credit for all those years you worked for The Man.